Yield farming is a DeFi strategy where users place crypto assets into protocols to earn rewards. Those rewards can come from trading fees, interest, governance tokens, or promotional incentives.
How yield farming works
A user might supply assets to a liquidity pool, lend stablecoins, or stake tokens in a protocol. The strategy can change as reward rates move.
Why it is risky
High yields often come with high risk. Users can lose money from token price drops, impermanent loss, scams, hacks, liquidation, or smart contract bugs.
Yield farming is best understood as an advanced DeFi activity, not as guaranteed income.